Angela Merkel unveils Germany’s largest programme of public sector cuts

Freemason Angela Merkel
Germany seems to be heading for a summer of unrest after Angela Merkel announced what she described as the country’s largest programme of public sector cuts.

The package, agreed after two days of Cabinet discussion, amounts to slashing the budget by €80 billion (£66 billion) between now and 2014. The aim is to ensure that Germany meets the euro-stability pact criteria for public borrowing by 2013.

“The last two days have entailed a unique act of exertion,” the Chancellor said when she presented what the German press is already calling her “list of horrors”.

“The crisis in Greece has shown us the importance of good housekeeping,” Ms Merkel added. “Germany has a responsibility to set a good example.”

For 2011 Germany has promised cuts of €11.2 billion, with another €2 billion having to be found to prop up the state health insurance fund. By 2013 the cuts will reach €23.7 billion.

“Over the last years we have lived beyond our means,” said Guido Westerwelle, the head of the Free Democrats and Ms Merkel’s coalition partner.

The cuts will include redundancy for more than 10,000 civil servants working for federal ministries, a scaling down of welfare payments and the loss of about 40,000 jobs from the Army. Karl-Theodor zu Guttenberg, the Defence Minister, has been ordered to prepare proposals by September. He favours suspending conscription and closing barracks but this may not be enough to bring the hefty savings demanded of him.

Parental allowances will be capped. The Chancellor described it as a socially balanced plan with business having to shoulder its share of the cuts.

Subsidies on solar-energy installations are to be scaled back, nuclear energy producers will pay a levy on power stations that are kept running for longer than scheduled, the airline industry will pay an air traffic tax. Germany would also be pursuing a tax on financial transactions that is expected to be signed and sealed in time to benefit the 2012 budget.

Ms Merkel and Mr Westerwelle said that there would no slashing of state pensions, no increase in income tax or value-added tax. Such measures, it was decided, could inhibit economic growth and consumer spending.

The trade unions were not impressed and have threatened protest action. “You can see what they are trying to do,“said Michael Sommer, chairman of the German Trades Union Federation. “They want to hit the poor and protect the big fish. That is not something we are going to play along with — we are ready to carry these conflicts into the factories.”

Frank Bsirske, head of Verdi, the service workers’ union, said that the Chancellor was in for a fight. “You can see cuts in pension contributions for the long-term unemployed, shrinking parental allowances, fewer subsidies for job creation and thousands of jobs being slashed — this is not a just way of going about things.”

The Social Democrats, who suffered a general election defeat in September but are bouncing back in the opinion polls, sense that the Chancellor is vulnerable. She is having to demand big sacrifices from the Germans at a time when she is weak and under fire at home and abroad.

Cuts across the eurozone

Greece Budget deficit 13.6 per cent. Retirement age to rise from 61.4 to 63.5. Public sector salaries and pensions frozen for three years. VAT to rise to 23 per cent

Italy Budget deficit 5.3 per cent. About 24 billion euros in cuts planned for 2011. Public sector pay frozen and retirement age raised

Spain Budget deficit 11.2 per cent. Public sector pay cut by 5 per cent as part of this year’s 15 billion euros of cuts

Ireland Budget deficit 14.3 per cent. Child benefit cut by 16 euros a month as part of 760 million euros savings

Portugal Budget deficit 9.4 per cent. Highest-paid public sector earners’ salaries cut by 5 per cent. VAT up 1 per cent and income tax up to 45 per cent for those paid more than 150,000 euros

France Budget deficit 7.5 per cent. Three year spending freeze and crackdown on tax avoidance